Gold exchange-traded funds (ETFs) in the U.S. have once again taken the lead in assets under management, surpassing the newly emerged American Bitcoin ETFs. This shift can be attributed to the recent surge in the traditional risk-off asset to a record high, coupled with a slump in Bitcoin’s value.
As per data provided by VettaFi, ETFs providing investors exposure to the price of gold are currently managing close to $150 billion in assets. This stands in contrast with the 11 Bitcoin ETFs, which were approved by the SEC last year and presently manage over $93 billion in assets.
In December, Bitcoin ETFs briefly outshone their gold counterparts, a development attributed to the cryptocurrency’s price surge following the election of Donald Trump as U.S. President. His policies were widely anticipated to augment the digital asset industry. Bitcoin reached an all-time high in January, nearly hitting $109,000 on the day of Trump’s inauguration. However, since then, the cryptocurrency has been on a steady decline and recently traded around $84,000, down by approximately 25% from the record high.
This contrast in fortunes has coincided with gold hitting a record price of $3,014 per ounce. Investors, unnerved by the new president’s trade war, appear to be seeking less volatile investments. Gold, a traditional safe-haven asset, is often favored during periods of economic turbulence.
“Bitcoin does possess some safe-haven qualities, but of late, it has behaved more like a risk asset. That’s why we’ve seen more outflows in those spot ETFs,” explained Kent Thune, Senior Content Editor at etf.com, who manages research at the publication. He underscored gold’s status as an inflation hedge and safe-haven investment in the current economic climate.
Last year, the newly approved Bitcoin ETFs exceeded expectations as previously crypto-locked investors flooded the market with new capital. Just one month after trading commenced, these funds collectively breached $3 billion in net flows, surpassing the launch of gold ETFs two decades earlier.
However, macroeconomic uncertainties and traders’ concerns about Trump’s policies have led to substantial outflows this year, contributing to the decline in Bitcoin’s price.
Despite this, Bloomberg ETF analyst Eric Balchunas suggests that this trend could soon reverse, referring to Bitcoin as the real “hot sauce.”
“It’s not really a reflection of customer interest,” he clarified, attributing gold’s resurgence to market forces. Balchunas argued that most investors prefer stocks and bonds and are attracted by the speculative nature of Bitcoin. “Gold isn’t hot sauce,” he said. While gold may have won the recent battle, Balchunas believes that Bitcoin could win the war in the medium to long term.
